IFX Market Report: Tuesday 15th December 2020

The Pound is a touch softer this morning as the excitement of Sunday’s extension has worn off, and the difficult reality of actually securing a Brexit trade deal, still persists. It is understood that Michel Barnier held a briefing with EU ambassadors to inform them on the “current state of affairs” of negotiations. Although “very large gaps” remain, Barnier indicated that the UK had backtracked on its demands thus sparking hope a deal could be agreed. A UK source later denied this claim, stating that “the inaccurate briefings from the EU side in recent days have made a difficult discussion even more challenging in the short period of time we have left”.

While negotiations are still deadlocked, GBPUSD struggled and feel victim to the market’s downside pressures. Starting the day not far off the 1.34 mark at 1.3391 – by the end of the session the pair was weak, closing Monday off at 1.3322.

Sterling also was unable to sustain itself against the Euro, losing its grip on the 1.10 handle and falling into the 1.09’s. GBPEUR started the day off at 1.1020 and quickly started to see losses as Brexit anxieties weighed heavy on the Pound. The pair finally closed the session off at 1.0970.

Contrasting news and comments from both sides are likely to induce heightened volatility in the Pound this week as negotiation teams try to finalize a deal. Yesterday for example, Ursula von der Leyen said yesterday that negotiators “are on the very last mile” – suggesting that a conclusion is not only in sight, but a very strong possibility. With that said, only hours later, Senior MEP and member of the EU’s UK coordination group, Nathalie Loiseau, said that trying to agree a deal with the UK is “like climbing the Himalaya from the northern side”.

With comments like the above it is hard to establish the current status of talks, how much progress has been made, or how close both sides are to a deal. What it does make clear is that differences remain, and time is running out. As we edge closer to January 1st the likelihood of a deal becomes less and less.

Once again, EURUSD traded in a tight range in Monday’s session. The pair started the day off at 1.2151, and closed not too far below, at 1.2144.

On the data front, at 07:00 this morning we had Septembers Employment Change from the UK. Forecasted at -250K, the Actual figure was better than expected, coming in at -144K – and even was an improvement on last months reading of -164K. This afternoon is quiet, with only Novembers Industrial Production from the US worth noting.

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